The Confident Chronicles: Feb 3, 2025
We have one month under our belt for 2025.
And what a wild ride it has been already! (see S&P 500 info below).
With the first month of investing in your employer’s plan, it’s a good time to review the amount you are contributing.
There are new limits in 2025 for 401(k) and 403(b) plans and you have the opportunity to invest more if you can.
The amounts depend on your age, and it’s really convoluted this year:
· $23,500 – Employee Contributions
· $ 7,500 – Catch Up Contributions for those over age 50
· $ 3,750 – Special Catch Up Contributions for those ages 60 – 63
· $70,000 – Maximum Employee + Employer contributions
If you have a “SIMPLE” (Savings Incentive Match Plan for Employees), the 2025 limits are:
· $16,500 – Employee Contributions
· $ 3,500 – Catch Up Contributions for those over age 50
· $ 1,750 – Special Catch Up Contributions for those ages 60 – 63
It’s important to know the limits of what you can contribute if you can afford to contribute the maximum amount each year. And it’s even more important to know the new rules if you are ages 60 – 63, because you can contribute more than ever before!
-Kevin T Clark, RF™ - CEO & ERISA Nerd
Market Returns:
Every day we monitor three major components of the financial markets. We keep an eye on the over all U.S. Stock Market (S&P 500), the “technology” segment (NASDAQ) and the Intermediate Bond Market.
As you can see above, all three components have started the year off on a positive note.
However, as you will see below with the S&P 500, the gains have not come in a straight line.
There has been a lot of volatility in the first 31 days of January, and I fully expect that trend to continue.
Above are the Morningstar “style” boxes showing returns for the size of U.S. stocks (Large, Mid & Small) and the categories showing a stock’s potential (Value, Core & Growth).
As you can see, all sizes and categories are positive.
However, the “risk” categories (small and growth) far outperformed the more conservative like the Core and Value categories.
The exception is the Small Value category which had a return similar to the return of the Large Growth category.
This is interesting, as it shows that investors are willing to risk their money and yet try to balance the risks.
This is different than last year where it seemed the Growth categories outperformed all the other categories.
This could be foreshadowing of money coming out of the markets if we start to see increased volatility or any uncertainty.
Above is the S&P 500 chart for the month of January showing how it returned 3.30%.
As you can see the first few trading days were positive and then the markets sold off sharply until January 10th before starting its upward trend on the 14th.
The S&P spent over half of the month trading below its 50 day moving average (a negative indicator) and half the month with a negative MACD (red line above the black line) in the bottom chart.
February begins with some uncertainty as 25% tariffs begin for Canadian and Mexican goods coming into the U.S.
We will see what kind of effect that may have on the profit margins of U.S. companies that rely on goods from these countries and what affect it will have on the S&P 500.
PLAN CONFIDENCE MODEL UPDATES:
FUTURE CONTRIBUTIONS:
Future contributions are money that is added to your plan with every paycheck.
We monitor the future contributions monthly and are looking to direct these monies into investments that we hope to be “on sale” for the next 30 days.
If we are correct, this will allow you to buy more shares in your portfolio.
This month we are advising that you use the following:
· Foreign Large Growth
· Mid-Cap Blend
· High Yield Bond
“Future Contributions” are an optional feature in Plan Confidence, and you may or may not receive this advice.
Please discuss this with your advisor if you have any questions.
The exact amounts you should allocate depend on the model that you are using.
These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.
You can find all substitutions on your “Proxy Page” within your dashboard.
Please log into your Participant Dashboard to see the exact allocations you should be using as of today.
CURRENT ALLOCATIONS - STRATEGIC MODELS:
Current Allocations are the monies currently in your plan.
Making changes to this money is commonly known as a “rebalance”.
Our “Strategic Models” combine the benefits of asset allocation and “buy and hold” strategies. These models rebalance quarterly back to their risk “targets” and remain fully invested through all market cycles.
Our Strategic Models rebalance the first trading day of every quarter.
Strategic Models – No Changes
The exact amounts you should allocate depend on the model that you are using.
These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.
You can find all substitutions on your “Proxy Page” within your dashboard.
Please log into your Participant Dashboard to see the exact allocations you should be using as of the last rebalance advice.
CURRENT ALLOCATIONS - TACTICAL MODELS:
Current Allocations are the monies currently in your plan.
Making changes to this money is known as a “rebalance”.
Some plans have trading restrictions on how often you can rebalance the money in your plan. Be sure to know your plan’s restrictions before implementing any tactical strategies.
Our “Tactical Models” combine the benefits of asset allocation and “momentum investing” strategies.
These models rebalance periodically back to their risk “targets” and the targets can be changed at any time given the current market conditions.
These models may go through periods of time while holding larger amounts of cash than the Strategic Models.
Our Tactical Models may rebalance on any given day.
Please be sure to look for an email from support@planconfidence.com letting you know when to make changes.
Tactical Models – No Changes
Be sure to login into your Participant Dashboard to check out the exact advice for your plan.
You should have received an email at 9am EST letting you know to log in to your Participant Dashboard to review the new advice.
The exact amounts you should allocate depend on the model that you are using.
These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class and label it as a “proxy”.
You can find all substitutions on your “Proxy Page” within your dashboard.
Please log into your Participant Dashboard to see the exact allocations you should be using as of the last rebalance advice.
This update has been written by Kevin T Clark, RF™.
All opinions expressed are those of the author and not that of Plan Confidence Corporation nor any other firm or individual.
Kevin T Clark, RF™ is the CEO and Co-founder of Plan Confidence Corporation.
Kevin is an “ERISA Nerd” and one of only a hundred(ish) Dalbar certified Registered Fiduciaries (RF™) in the United States.
He has been helping hard working Americans invest their money since 1997!
Plan Confidence Corporation is an SEC registered “internet only” investment firm specializing in providing advice to hard-working Americans investing in their employer’s retirement plans (401k, 403b, TSP, etc).
They have created proprietary software so hard-working Americans can receive professional, ongoing advice on their employer’s retirement plan from an adviser of their choosing!
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